Edible oil prices may dip on high output cues

Prices of vegetable oils are likely to decline between Re 1 and Rs 1.50 a kg in the next three months. The drop is because of higher estimates of oilseeds output and the government's frequent import duty cuts to fight inflation.

Duty cuts in the past had failed to affect the domestic edible oil prices largely because of higher consumer demand. But, this time around, expectations of bumper oilseed crops were likely to impact the prices, said Dinesh Shahra, managing director of Ruchi Soya Industries, the country's largest soybean crusher.

The total acreage under oilseeds during the current kharif season ended August 23 witnessed an 8 per cent jump at 167.93 lakh hectares compared with the last year's to 155.41 lakh hectares. The current sowing area is much above the government's estimate of 155.67 lakh hectares.

According to an NCDEX study, the sowing area under edible oilseeds surged 8.1 per cent to 167.9 lakh hectares in the current kharif season compared with 155.41 lakh hectares last year.

Of the total acreage, the soybean area has witnessed a rise of 8.9 per cent at 86.9 lakh hectares as against 79.8 lakh hectares during the period under consideration. The area under groundnut cultivation has recorded a significant increase of 13.4 per cent at 50.9 lakh hectares compared with 44.9 lakh hectares during the same period. The castorseed sowing area has perked up 16.7 per cent to 6.4 lakh hectares as against 5.5 lakh hectares.

Experts believe that high edible oil prices have lured farmers to shift to oilseeds from other crops for better remuneration.

The soybean output this year is likely to go up by 10-12 per cent at 85-86 lakh tonnes from the last year's 75 lakh tonnes on favourable monsoon and higher acreage. With an average oil content of 19 per cent, the total soyoil output is likely to increase by 2 lakh tonnes.

Shahra said the first month of the soybean harvest would see a total crushing of 3-4 lakh tonnes, which would go up to 9-10 lakh tonnes next month. A similar quantity would be crushed each month till January. However, from February onwards, the quantity would decline to 7-8 lakh tonnes.

The country imports about 40 per cent of its edible oil requirements of 11-12 million tonnes from Malaysia and Indonesia.

But this year, a bumper crop in these countries and lower customs duty are expected to flood the Indian markets with cheap imports.

However, any duty reversal by the government or quantity cut by exporting countries might change the sentiment, Shahra warned.